Global monetary policy has moved through various regimes over the past decade: from traditional interest rate cuts to unconventional measures, such as quantitative easing (QE), forward guidance, and yield curve control. In many economies, policy rates have reached the lower bound, leading to ZIRP – zero interest rate policy – and NIRP – negative interest rate policy.
In September, the ECB cut its deposit rate deeper into negative territory and embarked on renewed QE. In anticipation of this policy adjustment, Germany’s government bond yields fell precipitously, with the entire curve moving into negative territory in August (Figure 1). At that time, around US$17 trillion in global debt was trading at negative yields, eclipsing the US$12 trillion that was sub-0% in 2016 (Figure 2).